The Metaverse: Hype or Opportunity?

By Roberto d’Ambrosio, Chief Executive Officer – Axiory Global

The Metaverse, the future of everything, at least following the view of the tech giant Facebook.

They’ve even rebranded their entire Group “Meta” to give a clear indication of where they’re heading. They are, indeed, putting their action (and their money) where their words are. In 2021, Meta invested more than ten billion dollars in the development of the environment that will make the Metaverse a reality.

The transition is facing some bumpy roads. Looking at the numbers released in July, Reality Labs, the company which is directly involved in the Metaverse development launched in 2019 and posting relevant losses ever since, reported a £2.8bn loss for Q2 2022, which adds up to the $3bn loss in the previous quarter.

The pace at which a fully functional, advanced virtual reality environment can be finalized and delivered to users appears to have been overestimated, and the results have thus far disappointed analysts. The release of Zuckerberg’s avatar, which appears to be quite flat and unimpressive in design, raised more than one eyebrow.

Internal memos revealed on the internet by company officials bemoaning the lack of engagement of Meta’s own developers and employees with the new product.

The Meta stock’s trend clearly reflects the negative impact of the company’s massive investment, declining from more than 380 USD in September 2021 to the current 128 as I write these notes. Zuckerberg himself has warned Meta shareholders that the investment in the Metaverse will require significant additional investment and time before it begins to pay off.

So, was Facebook’s move too bold, even reckless? Will Metaverse be the next big thing or just a passing fad?

The estimated 120 billion USD total investment in the Metaverse for 2022 would argue the opposite.

Major corporations, ranging from retail distribution to banks to the entertainment industry, are heavily investing in the Metaverse, which I believe is a wise move.

In contrast to Zuckerberg’s statements about the Metaverse, I do not believe that such a large portion of social interaction will be transferred and carried out in the new virtual environment in the near to medium term.

Similar to Zuckerberg, Philip Rosedale, the founder of Linden Labs in 1999, which created Second Life, a virtual environment in which Avatars can be created in any shape and form, and can move within the virtual world by walking, flying, or teleporting, made a similar statement. An entire world based on its own currency, the Linden, which can be earned and spent in the virtual world to sell and buy services and even virtual land, and which can be exchanged for Fiat money (does this sound familiar?).

Corporations bought land to advertise and sell their products at the time, and political parties did the same to persuade voters. The platform’s struggle with technological limitations and recurring legal issues has caused interest in Second Life to wane. As I was required to write this article, I reactivated an old account that I had created in 2001, and the virtual world, to be honest, looked quite depressing.

Of course, technology has advanced dramatically, and computing power, internet speed, and new virtual environment gears are no longer comparable to what was available when Second Life was created. In a nutshell, the shift to virtual environments is an undeniable fact and trend.

I believe that there are some fields where interacting in the Metaverse can significantly alter people’s habits. The entertainment industry, for example, can change the level of engagement with their users to a level of interaction never seen before, thanks to Disney’s heavy investment in the Metaverse.

Any situation in which training is required, or remote working is required, can greatly benefit from the Metaverse, thereby contributing to its transformation into a true “alternative” world, providing new opportunities to all companies, regardless of industry.

Even the financial sector, including the online trading niche, will benefit from such an environment, greatly improving investor engagement with their intermediaries and advisors and providing constant uptime of trading tools to run automated strategies, a huge step forward from actual physical and virtual servers operating within a closed environment. Of course, the hardware providers who will be required to support the complexity of the Metaverse will have a great opportunity to grow their sales while also facing a significant challenge in terms of new investments.

That is why companies such as Nvidia, Apple, Microsoft, Amazon, Google, AMD, Intel, and others are investing and will reap the benefits as the Metaverse matures and attracts millions of users.

Investing in companies that are strongly linked to the Metaverse new venture is a good idea, provided that the return expectations are aligned with those of the underlying companies, which are aimed at the medium and, in some cases, long term. And, as always, investors must carefully size the investment in relation to the investment portfolio’s composition, time horizon, and investor risk tolerance.